The topic of "junk fees" has been in the headlines, spurred by legislative action across various sectors. From regulations on credit card late fees to the Federal TICKET Act targeting concert event fees, lawmakers are actively implementing measures that impact how businesses can structure their fees. As part of this nationwide trend, California is taking a significant step with a new law aimed at curbing alleged junk fees associated with ATM transactions.
Beginning January 1, 2025, a new California law prohibits banks and credit unions from charging fees for declined ATM withdrawals due to insufficient funds. Assembly Bill 2017 applies to state-regulated banks and credit unions, reflecting a growing movement to curtail such fees across various financial institutions. This legislation aligns with federal rules from the CFPB (previously discussed here) that apply to federally chartered banks, severely limiting the fees charged to consumers when they overdraw their accounts.
The new law is part of a legislative trend in California aimed at curbing various alleged junk fees. For instance, Senate Bill 1075, which limits overdraft fees to $14 for credit unions unless a lower federal limit is set, is slated to become law in 2026. Additionally, Assembly Bill 2863 will require consumer consent for subscription renewals, effective July 1, 2025, further underscoring California's focus on business fees typically charged in the California market. However, commenters argue that the legislative and regulatory focus on consumer fees may ultimately harm vulnerable segments of society by increasing the amount of unbanked people, due to financial institutions being forced to increase broad-based maintenance fees on low-balance consumer accounts.
Putting It Into Practice: As California, the federal government, and other states continue to tighten regulations on junk fees, businesses, especially in the financial sector, face potential legal risks (previously discussed here and here). The evolving regulatory landscape could lead to increased litigation from the plaintiff's bar. Companies may need to navigate complex compliance requirements and reassess their current practices to lessen the risk of litigation and regulatory enforcement.
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